Pensions drain the coffers as budgets tighten

Feb 9 2009 by Adrian Pearson, The Journal

EVERY North East household is paying out up to £350 a year to fund expensive council pensions as leaders use money meant for essential services to pay retired staff.

When taxpayers are handed their new council tax bills this spring they will be facing an increase likely to be around 3%. But before the bills, sometimes worth more than £1,400, can be handed over to highways or elderly social care departments officers will snatch up to a quarter of the cash and divert it straight into a staff pension account.

In the last year alone council bosses agreed to take more than £185m from local tax bills. Part of this is used to encourage staff to retire early rather than add to redundancy measures.

Because many of the region’s councils are still allowing staff to retire early on the full pensions the overall costs can be up to £200,000 extra per council.

Last night councils were urged to look again at funding arrangements for the “gold-plated” pensions. Northumberland Conservative leader Peter Jackson called on Chancellor Alistair Darling to consider changes to the pension system which could free up more than £100m for cash-strapped local services.

Mr Jackson: “We all live in the same region yet it has been increasingly evident that there are double standards between the public and private sectors and the gold-plated pension promises to the public sector are increasingly impossible to fund from council tax.

“This Labour Government has been ducking this issue for the last four or five years. The recession is only going to make the public-private divide worse and a new look at the settlement between the two is urgently needed.”